Christine Lagarde, early February. KAI PFAFFENBACH / REUTERS
“The banking sector in the euro zone is resilient”, also underlines the board of governors of the institution, in a press release, this Thursday.
Another rate hike in sight. This Thursday, the Governing Council of the European Central Bank announced that it had decided in favor of an increase in “three key ECB interest rates of 50 basis points», or 0.5 percentage points. Objective: fight against persistent inflation.
In addition, the Board of Governors returns to the setbacks of financial institutions, which have worried the markets in recent days. Saying watch “carefully the current tensions on the markets“, he adds to be ready to”take the necessary measures to preserve price and financial system stability in the euro area. The euro area banking sector is resilient and has strong capital and liquidity positions“, he underlines in a press release, adding that the ECB can count on “a full range of monetary policy instruments enabling it to support, where necessary, the liquidity of the euro area financial system and to preserve the smooth transmission of monetary policy“.
Christine Lagarde, President of the ECB, also assured that the banking sector “is currently in a much stronger position than in 2008during the financial crisis that had destabilized the world economy. Although it warns that the ECB will not makecompromise” enter here “price stability and financial stability“, the increase of 0.50 percentage point in its key rates by being “the proof“.
Inflation lower than expected in 2023
The ECB is also taking advantage of this publication to revise its forecasts for the coming months upwards. Inflation”should average 5.3% in 2023, 2.9% in 2024 and 2.1% in 2025“. In December, the institution rather forecast 6.3% for this year. Likewise, the economic outlook is improving: growth is seen, for 2023, at 1% on average, against 0.5% expected in December, “due to lower energy prices and a better resilience of the economy to a difficult international environment», Provides the institution. It should then accelerate, reaching 1.6% in 2024 and 2025, “underpinned by a robust labor market, rising confidence and a recovery in real incomes“. However, this rebound is “weaker than expected in December», Rising rates oblige.
The ECB’s decision was watched by the markets, while the solidity of certain financial institutions such as Credit Suisse have worried in recent days. In addition, the ECB no longer says that it will continue to raise its rates in the months to come: the next decisions on the key rates will be determined in particular according to “assessment of the inflation outlook», in particular inflation excluding energy prices, specifies the press release. Christine Lagarde nevertheless believes that the ECB “still has a long way to goon rate hikes. “Our determination is intact” in order to “bring inflation back to our target of 2% over the medium term“, she said.
Reduce budget support for households and businesses
Christine Lagarde on Thursday called on eurozone governments to start “quickly» to reduce budgetary support for households and businesses, to fight against inflation, while energy prices are falling. “It is important to start quickly to reduce these measures in a concerted way” to avoid “increase medium-term inflationary pressuresshe said on Thursday after the ECB’s monetary policy meeting.
She also called for a societal debate on a “adequate sharing” of “burden» inflation, while the margins of many companies have increased in recent months in the euro zone. “The price hike worked a bit like a taxon households, she lamented. According to several analysts, companies have recently reconstituted their margins by raising their prices beyond the only increase in their costs linked to inflation, which has also fueled the rise in prices.